Here are some common mistakes people make when applying for a home loan in Singapore. This includes both HDB loans and bank loans.
⚠️ Common Pitfalls When Applying for a Home Loan
1. Important to check Home Loan Eligibility First
- Buyers need to check their HDB Loan Eligibility (HLE) letter. They should also look at their bank’s In-Principle Approval (IPA). This is important before buying a flat, whether it is a BTO or resale.
- Risk: You may not qualify for the loan quantum you assumed, causing financing gaps.
Tip: Always secure HLE (for HDB loan) or IPA (for bank loan) before committing to any purchase.
2. Overestimating Loan Amount
- Buyers sometimes assume they will automatically qualify for the maximum LTV (75% HDB, 75% bank).
- Factors like income variability, outstanding debts, and credit score can reduce the loan amount.
Tip: Factor in the 30% Mortgage Servicing Ratio (MSR) and 55% Total Debt Servicing Ratio (TDSR) when calculating affordability.
3. Ignoring Credit Score & Outstanding Debts
- Late bill payments, high credit card balances, or existing car/personal loans reduce your loan eligibility.
- Bank loans are especially strict on credit history.
Tip: Clear or reduce other debts and check your CBS (Credit Bureau Singapore) report before applying.
4. Forgetting About Age & Loan Tenure Limits
- Loan tenure is capped at 25 years for HDB loans, and generally 30 years for bank loans.
- If you’re older, your loan amount may be much lower than expected because it must end by age 65 (HDB) or 75 (bank).
Tip: Younger buyers qualify for longer loan tenures, which increases loan eligibility. Consider applying jointly with your spouse or partner to balance both age and income.
5. Not Preparing Enough for Upfront Costs
- Downpayment, stamp duty (BSD/ABSD), legal fees, and renovation costs are often underestimated.
- Example: A S$500,000 resale flat requires 25% down payment (S$125,000) for HDB loan, plus stamp duty (~S$9,600).
Tip: Budget at least 30% of property value in cash + CPF for upfront costs.
6. Mixing Up CPF Usage Rules
- Some buyers use too much CPF for their first property and later struggle when upgrading.
- For second HDB loans, you must use some of your CPF refunds and cash from selling your previous flat before getting another loan.
Tip: Plan CPF usage carefully, don’t drain your OA completely.
7. Not Comparing HDB vs Bank Loan Properly
- HDB loans offer stable interest (2.6%) and flexibility with CPF downpayment.
- Bank loans may start lower but are subject to market fluctuations (SORA-linked).
- Some buyers lock into bank loans without considering rising interest risks.
Tip: Compare long-term repayment paths of HDB vs bank loan before deciding.
8. Missing Deadlines
- For resale, failing to exercise the OTP within 21 days can cause you to lose the option fee.
- Missing loan application deadlines can delay or void the purchase.
Tip: Work with your agent/mortgage broker to stay on track with deadlines.
Always seek expert advice before making a major financial decision. At IQrate, our experienced mortgage brokers can guide you through the process, help you avoid costly mistakes, and ensure you secure the best financing solution for your needs.